How long will the chaos last? How will this shake out in the housing market? Should we brace for an even-longer housing bust?

Josh Levin, a Citi home-builder analyst, seems to be wondering the same thing. On Monday, he held a conference call featuring Adam Levitin, associate professor of law at Georgetown University. Tuesday, Mr. Levin distributed a research note that takes a stab at these questions.

But before we get to the answers, let us add–as Mr. Levin does in his note–another problem: Real-estate law. It is arcane and requires that paperwork be physically transferred when mortgage ownership is transferred from one party to another, Mr. Levin explains.

During the go-go housing boom years, paperwork wasn’t necessarily transferred properly and some appears to be missing. That’s emboldening some troubled homeowners (and their lawyers): They’re challenging their lender’s authority to even foreclose. A growing concern is that more home owners will find a sympathetic judge willing to cut their mortgage balance to $0.

“At the end of the day, the U.S. can’t afford for this to go too far,” Gregor Watson, with McKinley Partners, a development company that buys foreclosed homes, tells Developments.

During the call, Mr. Levitin gives three potential outcomes for what is being dubbed “Foreclosures gone wild.”

In the best case scenario, the issues are simply technical, the situation is resolved and the foreclosure process continues. Many believe housing won’t recover until the glut of foreclosed homes clears the market.

In the medium-case scenario, litigation ensues and the matter takes years to sort out. That will inflict more pain onto the already troubled housing market.

In the worst case, the issues become a “systemic problem” that grinds the mortgage market to a halt and title insurers refuse to insure mortgages involving existing homes. In other words, housing Armageddon. “It would be devastating for the resale market if this robo-signer issue spiraled out of control,” Mr. Watson says.